Yesterday’s failed breakout landed SPX right back at the support on which we’ve been focused for the past several months.  Can fundamentals matter?  If so, the Fed’s recognition that equities are overvalued means it’s destined to fail.  Spoiler alert: not if algos have anything to say about it.continued for members…

USDJPY, which was well on its way lower, has been pressed into more propping duty.  Look for it to test the red TL again — maybe even top it temporarily. And, CL, having already reversed at the .618, will likely take another run at it today.  Again, all it needs to do is top it — even a little bit — to confirm that yesterday’s highs were just a stop along the way to even higher.

ES’ chart tells the story: a breakout that was trashed by Fed minutes that dared to describe equities as overvalued.

This leaves SPX with the challenge of maintaining the yellow channel breakout — as has been the case for several months.

I suspect we’ll basically attempt what was attempted yesterday all over again — with USDJPY and CL ramping and VIX, of course, dropping down through all support to dip below the yellow channel bottom again.

The combination of all the above should allow SPX to remain above the yellow channel top, currently around 2351.89.

UPDATE:  9:48 AM

SPX has dropped just enough to put in a nice tag on the gray channel bottom, which was lacking in yesterday’s stick save.  This is where SPX should bounce if it’s going to.

UPDATE:  10:00 AM

I suspect that, at some point, SPX will try to shift from the gray channel to something a little more in keeping with the white one — say the red channel sketched in below.  But, the bulls will want any tags on its bottom to occur after a breakout of the falling white channel — preferably one which lasts, this time.

I have a meeting outside the office this morning, so will sign off for the next couple of hours.  I’d stay long as long as SPX remained in positive territory and, specifically, above the gray channel bottom.

UPDATE:  10:25 AM

Here’s one last look at everything before I go.  The gray channel intersection with SPX’s .886 no longer makes any sense — which is why I’m going with the red channel for now.  The red channel top intersects with the .786 at 2384.08 by tomorrow’s close — which makes it a good end of the week target.

UPDATE:  1:37 PM

Just had a chance to do some big picture charting, and I think this is the script for the next couple of weeks.  Because of yesterday’s drop, there’s an opportunity to construct an IH&S that targets 2458ish.  There are no Fibs there.  But, nearby is the intersection of the extended broken purple channel, the still intact white channel, and the (steep) rising red channel.  I expect SPX to break out of the red channel I added this morning.

Here’s a close up of the below the neckline action.

Here are both charts, de-cluttered a bit. Needless to say, this presumes that they’re able to hold the yellow channel top above which SPX broke out.  I have some interesting charts that touch on the breakout, but I’ll have to wait until this weekend to lay it out properly.